Uses and Abuses of African Debt
George, Susan
The International Squeeze on Poor Countries No phenomenon lasting for a decade deserves to be labeled a "crisis." It has thus become acutely embarrassing to speak in 1992 of the third-world debt...
...Those who say offhandedly that the level of Africa's debt doesn't really matter because Africa isn't paying back anyway have not looked seriously at the figures...
...in 1990, 85 SUMMER • 1992 • 337 African Debt percent of them were...
...The majority of farmers in the region cultivate small plots of land and do not produce sufficient marketable surplus to benefit from higher producer prices...
...There could be a hidden advantage for Africa in the liberalization of Eastern Europe if these countries begin to consume significant quantities of African products...
...They have increased their contributions from six hundred million dollars at the outset of the 1980s to a billion dollars at the end of the decade...
...Sadly, neither is true...
...Most people in the creditor countries know little and care less about third-world debt...
...Realpolitik seems to militate almost entirely against an equitable solution for Africa, and' only the extremely guarded optimism of the French belief that the worst is not always certain can be of some comfort...
...These traders, who are the actual purchasers of African raw materials, paint a gloomy picture indeed...
...13 Susan George, A Fate Worse Than Debt (New York: Grove Press, 1988...
...Prices for these raw materials have lately dropped to the lowest levels on record since the 1930s...
...Herein lies the mystery: $136 billion worth of debts reimbursable to public lending sources represents a crushing load for Africa, but for the said public lending sources the same $136 billion is, frankly, peanuts...
...Seen from the African point of view, then, debt is ever more intolerable...
...This is all the more serious because trade is, on the whole, thriving...
...The needs of Africans must come before those of outsiders, who, in any event, are buying fewer and fewer African products...
...From $77 billion in 1982, it had risen to $164 billion, an increase of 113 percent...
...Although the near-universal imposition of the free-market model is, from the creditors' 340 • DISSENT African Debt point of view, a major achievement, politically, too, the debt crisis has its uses...
...Everyone must attempt to export the same limited range of raw materials or slightly more sophisticated products to shrinking markets...
...SUMMER • 1992 • 343...
...All the figures belie this optimism...
...6 GATT, International Trade 89-90, Vol...
...To date, wealthy Africans show no signs of bringing their money home...
...Gone are the demands for a New International Economic Order, for binding codes of conduct for transnational corporations, or transfers of technology under favorable terms...
...The WFP estimated that in 1991, at least thirty million Africans required emergency food aid...
...12 International Labour Organization, African Employment Report 1988, Jobs and Skills program...
...In other words, 83 percent of Sub-Saharan Africa's total debt—and virtually all the debt of the very poorest SSA countries—is owed to public sources: either to OECD country governments or to multilateral agencies like the World Bank and the International Monetary Fund (IMF...
...The longevity of Africa's debt is particularly worrisome...
...You would be wrong...
...At the end of 1991, the United Nations's optimistically titled publication Africa Recovery wanly reported, under the headline "Donors stalled on 'Trinidad' relief," that "discussions under way for over a year among Western creditors offer only the prospect of a watered-down version of the so-called `Trinidad' proposals which . . . would significantly help a number of African countries...
...Forum on Debt and Development (FONDAD), The Hague, 1991, paragraph 4.10...
...They gave significant amounts of aid to Ethiopia, Angola, and Mozambique...
...Just as regularly, nothing happens and everyone goes home...
...Just as the state is undermined, so are those parts of the United Nations system that could be most useful to the debtor countries...
...Since a substantial part of the hard currency thus freed would be used to purchase products from northern industries, creditors would receive much the same income as before...
...It is thus entirely possible that these figures are underestimates...
...What logic can there be for grinding down a whole continent in the name of an insignificant debt...
...Even in the most unlikely event that all forty-three SSA countries suddenly and collectively decided to stop servicing their debt, the world financial system would just keep trundling along, its computer screens registering scarcely a blip...
...Mubarak received spectacular debt relief as a reward for fighting on the "right" side in the Gulf War...
...They also seem to believe that their legitimate concerns are genuinely taken into consideration by the industrialized countries...
...On the other hand, there are obvious financial advantages in continuing to receive interest payments...
...Women have, as elsewhere, borne much of the brunt of adjustment, and their workload has increased...
...Through debt-for-equity swaps, one can take over assets and infrastructure, although this technique has rarely been applied in Africa because the continent offers few attractive targets for takeover...
...If at least a few African leaders had the courage to declare publicly that they are, given the means, prepared to share full responsibility for development with their own civil societies, we could move into a new phase...
...For example, in 1990, Africa's share of total third-world debt was only 11 percent...
...The purpose of structural adjustment is to generate "surplus" cash so that debt can be serviced...
...In all these countries, real wages have plummeted by anything from 30 to—in extreme cases-90 percent...
...4 Mistry, ibid., paragraphs 4.16 and 7.09...
...Certainly a chronic condition...
...4 Every summer when the G-7 are about to hold their annual jamboree summit, there is a flurry of rumors that African debt will at last be seriously dealt with...
...Among the prerogatives now being dictated from outside are • Control over the currency...
...Debt is used as a weapon of what I have called elsewhere "Financial Low Intensity Conflict," or FLIC, a new kind of warfare far better adapted to the late twentieth century than traditional forms of warfare like invasion and occupation...
...The TNI research team looked at all the usual factors determining demand, but also interviewed commodity traders, promising them anonymity...
...I prefer this source to the World Bank's better known World Debt Tables because the OECD relies on creditors' reports, not on the "debtor reporting system" of the Bank...
...Naturally, those who run this world are interested in safeguarding whatever parts of Africa contain strategic materials unobtainable elsewhere, but these parts make up an astonishingly small portion of the continent...
...Indebted countries must devalue when instructed to do so...
...It is investing little in the continent and is sometimes withdrawing altogether...
...Economically and commercially, it occupies too little space to force the world system to take much notice of its problems...
...Participants are given training in basic numeracy and accounting, and they must also adhere 342 • DISSENT African Debt to certain basic development principles...
...The classic case is the carrot/stick approach applied to Egypt during the Gulf War...
...The effects of their policies are well known...
...The whole of the African continent owes its public and private creditors $283 billion, but a large chunk of that ($119 billion or 42 percent) has been lent to North African countries, including heavies like Egypt, Algeria, and Morocco...
...If they are not, and we do not, then the 1990s risk being for Africa not just another lost decade, but a deadly one...
...Financial low-intensity conflict is also preferable to more naked intervention because it is so low profile...
...But instead of sterile inflows to governments and multilateral agencies, the money would create some jobs in the North and Africans would get something in exchange for it...
...It is also bizarre...
...Every country must devalue its currency (thus largely canceling out the supposed benefits of devaluation, since everyone's goods become cheaper on world markets at once...
...Many African governments still appear to be under the illusion that their countries are more important in the world scheme of things than they are...
...Although the Bank and the Fund always claim that their programs will reverse the trend, the OECD (under...
...As the International Labor Organization points out, Pine of the reasons for the growing extent of malnutrition in Sub-Saharan Africa is related to the policy of price liberalization for agricultural commodities . . . an improved pricing policy does not automatically alleviate rural poverty...
...Treasury takes a hard line on debt—anybody's debt—with the possible exception of its own...
...Nor can "primitive" warfare achieve the aims of today's sophisticated aggressor...
...The fixing of macro-economic policy...
...2 The wine being thus "watered down" was pretty insipid to begin with...
...Since 1982, the continent has been bled dry in order to reimburse its wealthy northern creditors...
...Roughly 60 percent of even that tiny figure can be ascribed to trade transactions carried out by South Africa and the North African countries, which GATT lumps in the "Africa" totals.' This means that the whole of the rest of Africa currently represents no more than 11/2 percent of world trade...
...No one denies either that the state probably has no place in the direct production of goods and that markets should be allowed to do what they do well...
...That the debt crisis has been a major factor compounding this disaster should be equally obvious...
...African economies have been wrenched by "structural adjustment" measures dictated by the World Bank and the International Monetary Fund...
...Meanwhile, however, they have made so many other stupid loans (for instance, to the U.S...
...Africa's potential is indeed enormous, as many African leaders never tire of pointing out...
...This would greatly facilitate the task of the researcher, but so far it hasn't happened...
...Recent harvests have been good in most of Africa, but production still does not keep pace with population growth...
...But Africa...
...Unless African nations, singly or jointly, can propose a plan bold enough to capture the imagination and the attention of the industrialized countries' governments and citizens, they will be forgotten in the New World Order...
...Northern industry benefits, although the savings are rarely passed on to the consumer...
...The World Food Program reports that malnutrition now strikes about 40 percent of African children compared to 25 percent in 1985...
...Probably so low as to be statistically insignificant...
...An excellent model for this kind of popular credit scheme is the Grameen Bank of Bangladesh, where repayment rates run over 99 percent...
...One can almost hear the sound of SSA sliding off the world map...
...Taking a different yardstick, Africa's debt accumulated over many years amounts to only 16 percent of the losses sustained (at least on paper) in a single afternoon of October 1987 when world stock markets crashed...
...In other words, Africa's debt is so modest as to be no threat to anyone except to Africans...
...The ascendancy of the World Bank and the IMF includes a substitution of their own power for the traditional powers of the state...
...Under structural adjustment programs, admittedly bloated public administrations have also massively sacked personnel, adding to the ranks of the unemployed...
...To say "Thanks, Hosni," the United States reduced Egypt's debt stock in one grand gesture from $51.2 to $39.9 billion, a drop of 24 percent, and one that no other third-world country has come close to meriting...
...The social gains of the sixties and seventies, where they existed, have been eroded or destroyed...
...Today, Africa has to count more on aid and less on trade...
...5 World Food Programme Journal, No...
...336 • DISSENT African Debt The "Trinidad Terms" follow the "Toronto Terms," which follow—well, never mind, since no proposal to reduce African debt has ever made much headway...
...Yet seen from a global perspective, SSA's debt can only be called insignificant...
...Rural-urban migrants gravitate to the "informal sector" as well in an attempt to make ends meet, but as the International Labor Organization has pointed out, "[T]he informal sector is a labor sponge with a finite capacity of absorption...
...Austerity measures—particularly the doubling or tripling of prices for basic staples—have led to riots in over two dozen debtor countries and have caused at least four thousand deaths with many thousands more wounded or detained...
...Because Africa's debt is minuscule by global standards, because it is mostly owed to public creditors, because it causes such obvious hardship, you might think that it would be particularly amenable to a political solution...
...So structural dependency on food aid will continue...
...So the crucial question really is, Why does the "crisis" endure and the cancer fester...
...Even these minor savings were painfully arrived at, because each of the debtors had to negotiate separately with the so-called "Paris Club," which represents all the creditors...
...19, JanuaryMarch 1992 and Solagral, Courrier de la Planete, No...
...it is also subjected to what one well-placed observer has called the Paris Club's "arcane protocols and procedures which are profoundly inimical to the interests of debtors or indeed to the achievement of sensibly negotiated outcomes" —this from a man who until recently had spent most of his career as a high-ranking official at the World Bank!' If we keep on going at this rate, the World Bank estimates that Africa's actual annual cash savings in debt service could reach a breathtaking $310 million by the year 2000...
...When the Berlin Wall was first breached, Western Europeans sat spellbound watching television pictures of East Germans devouring bananas as if they were nectar and ambrosia...
...energy or property development sectors) that one can see why they are trying to squeeze every last penny out of the likes of Argentina, Mexico, or Brazil...
...Many respected authorities, including the World Bank, have claimed to see light at the end of the tunnel, repeatedly announcing that the commodities situation is about to take a turn for the better...
...arguably a cancer...
...One reason the cancer is metastasizing is that African governments have never seriously sought to unite under a single debt-negotiating banner although they have had every reason to do so—and this is what bodies like the Organization of African Unity are supposed to be for...
...Already, by 1989, Africa's share of world trade was down to a mere 21/2 percent...
...Titled The African Alternative Framework to Structural Adjustment Programmes for Socio-Economic Recovery and Transformation, it provides the necessary macro-economic guidelines that we do not intend to summarize here...
...9 Africa Recovery, op...
...So why the unremitting bloodletting...
...In 1990 and 1991, for example, total service payments (interest and principal) represented a shade over 7 percent of total outstanding debt...
...Nor is Africa's plight improved by the maintenance of costly military machines or by leaders whose priorities include the purchase of multiple mansions abroad or the construction of outsized replicas of Saint Peter's and four-story statues of themselves at home...
...I, p. 15 and chart 5, p. 19...
...The not-so-subtle formulae for making the third world shut up and abandon its longstanding demands are accompanied by a de facto assault on the very notion of the state...
...Why do creditors continue to demand their pound of flesh...
...Their grants now equal total private investment...
...It has thus become acutely embarrassing to speak in 1992 of the third-world debt "crisis...
...First, such funds would provide financing to popular organizations for their own projects and for which they were prepared to supply the labor (building schools or clinics, improving village water supply, feeder roads, and so on...
...Third, such funds would provide wages for workers engaged in environmental rehabilitation and renewal...
...Thus one important reason that SSA's debt crisis has dragged on and on is simply that Africa hasn't the economic voice to make itself heard or the commercial clout to make its presence felt...
...Here we enter the realm of utopia...
...Most people don't have paid jobs anyway and rely heavily on the so-called "informal sector" —about 60 percent of the urban work force is not "employed" by anyone...
...The African traditional "tontine" (common fund) provides a similar model where social pressure to reimburse is strong because the existence of the group depends on it...
...some even say a conspiracy—but a crisis, no...
...8 OECD, op...
...GATT (the General Agreement on Tariffs and Trade) labeled the 1980s "a dynamic decade for world trade...
...Again, Asia took the lion's share . 8 Africans themselves seem to have little confidence in the economies of their own countries, structural adjustment or no structural adjustment...
...cit., Note 2, p. 9. to Ibid., pp...
...These "terms" would probably touch only $18 billion of SSA's total debt—this, in any case, is the amount being "watered down...
...Although one cannot make the case—at least not yet—that aid to the former Eastern bloc has "diverted" funds from Africa, as many African leaders claim it has, it is true that "SubSaharan Africa [is] the only major developing region not to have experienced an increase in overall financial flows," according to the OECD...
...This view may have been valid in the 1960s, but the world of the 1990s is a very different place...
...It is not an exaggeration to state that the IMF and the Bank now act as collection agencies for the creditor countries...
...In some cases, food-deficit farmers may actually become worse off...
...If the stock of debt were to be reduced only marginally, that is, by much less than half, this could serve mainly to free up cash for increasing other interest payments...
...The overwhelming majority of African countries rely for their foreign exchange earnings on run-of-the-mill commodities, increasingly produced in Latin America and especially Asia as well, and often obtainable with less fuss and bother than in Africa...
...Non-tradeables aren't just whatever local people eat, live in, and so on, but are roads and public transport, sewage and water systems, schools and hospitals, and anything else that, by definition, cannot be uprooted and exchanged for dollars, francs, etc...
...cit., Table 111.6...
...If the leaders promise that freedom of association and popular organizations will be encouraged and nurtured, that human and democratic rights will be fully respected, then they can propose a solution to debt based on a new social contract...
...Whatever indicator one cares to choose, the African disaster of the past decade is, or should be, obvious to all...
...At the Bank-Fund annual meeting in Bangkok in October 1991, the managing director of the Fund, Michel Camdessus, for the first time SUMMER • 1992 • 341 African Debt made clear that his institution would henceforward look much more closely at the military expenditures of its "clients...
...For what...
...This inability to arrive at a common stance has made it even easier for creditors to isolate and browbeat individual debtors when they take the Paris Club witness stand...
...The OECD's figures also include short-term debt whereas the Bank's do not...
...Latin American debtors owe three times as much as Africans and are far fewer in number, but they too have remained divided and therefore conquered...
...It also represents less than 5 percent of the total annual sales of the world's top two hundred transnational corporations...
...Not only must the debtor face the gang of its creditors alone...
...Another answer to the enigma of enduring debt is a political and ideological one...
...We will abstain from comparing Sub-Saharan African debt to the total public debt of the United States so as not to provoke hilarity among the readers of a serious journal...
...By the end of the eighties, the annual inflow of investment had crept back up to about a billion dollars, but this was still only 3 percent of total annual private investment in "developing countries...
...6 Where would Africa be if we were in a period of world trade recession...
...Thus the best efforts of the Fund and the Bank are concentrated on what economists call "tradeables" —anything you can sell abroad—while "non-tradeables" are neglected...
...These more "primitive" techniques— unless they are exceptionally quick and "clean," as in the Gulf War— are no longer accepted by most Western public opinion...
...Perhaps so, but during this dynamic decade, Africa's trade of goods and services regularly declined—the only region in the world where this was the case...
...Overall food import needs are projected at thirty to forty million tons by the year 2000—at prices no one can foresee today...
...In addition, most normal people would assume that in exchange for this Herculean effort, the continent had at least reaped a substantial reward...
...Glut and structurally depressed prices result as the debtors' attempt to export even more in the vain hope of at least keeping revenues stable...
...15 ECA, AAF-SAP, EtECA/CM.15/6/Rev.3, United Nations, 1989...
...The OECD and the Bank keep promising to "harmonize" their debt reporting systems and their figures: for example, the OECD estimates total third-world debt at $1450 billion, the Bank at "only" $1300 billion...
...II, Table 111.39 and (calculated from) Table 111.43...
...For the creditors, such a scheme would be equivalent to debt cancellation, but would keep Africa inside the system...
...The creditors, who claim that democracy is all-important, would look foolish and hypocritical if they refused to listen...
...Adjustment measures theoretically designed to help, say, small farmers and food production in Africa turn out on closer inspection to have the opposite effect...
...Herculean" is also the wrong adjective to describe the effort, better labeled "Sisyphean...
...Sometimes they may, but meanwhile, people with purchasing power acquire a taste for bread and other wheat products, driving imports up further...
...The "monopoly of legitimate violence...
...Environmental ruin could be halted and reversed...
...It seems boring and gets no television coverage...
...We have already mentioned several of the advantages they may find in maintaining the debt burden: They can obtain raw materials on the cheapest possible terms...
...The consequences of this failure are grave and have proved that disunity is a luxury Africa can ill afford...
...In his view the cessation of cold war hostilities made such expenditures obsolete...
...They should contract to pay in local currency over a long period and to put their payments into national or regional development funds whose purpose would be threefold...
...The export-led strategy in Africa is, however, a dismal failure...
...SSA should propose to stop paying debt service to public creditors (83 percent of the total) in hard currency...
...International officials must, in a sense, voice optimism, because the whole point of the structural adjustment programs they have 338 • DISSENT African Debt devised is to improve countries' export earnings...
...At first glance, the situation is indeed wholly confounding—Africa can't afford to pay, and the West doesn't need the money...
...A mere $28 billion (17 percent) of that sum was owed to private banks, nearly all of them European...
...Today, although making unprecedented sacrifices including the literal starvation of millions of its people, Africa as a whole is still paying only about half of the debt service theoretically due...
...According to a study undertaken by the Transnational Institute (TNI), to be published in 1992, Africa simply cannot hope to emerge from the current crisis so long as it continues to rely on exports of traditional products...
...These "lenders of last resort" hold the keys of the entire world economic and financial system and are thus in a position to make offers impossible to refuse...
...So long as people cannot be paid to plant trees, build terraces, shore up dunes, and so forth, the destruction will spread, because people are too busy surviving to be able to work without pay...
...Unfortunately, this is not the case...
...estimates flight capital from the region at some $40 billion...
...It would free hard-currency export earnings for more useful purposes than debt service and would simultaneously reduce the pressures to export, thus gradually allowing commodity prices to rise...
...The "Trinidad Terms," as first proposed by British Prime Minister John Major, could at best reduce Africa's debt by $34 billion (if all low-income African countries were to be made eligible for relief, which is highly unlikely...
...14 The Franca-Peruvian researcher Denis Sulmont has made a tally of these riots and their consequences, relying mostly on Western press sources for the numbers of casualties...
...Of fourteen commodities monitored by the United Nations in 1991, only one—iron ore—showed a modest gain in price...
...Debt relief must be linked to a coherent development plan, including much greater popular participation and genuine democracy...
...The problem with adjustment as now practiced, however, is the simultaneous and dogmatic application of an identical model to dozens of countries at once...
...The continent would then participate in the world trading system as a partner, not a beggar...
...Yet these agencies have kept a strict watch on Africa, holding its SUMMER • 1992 • 335 African Debt figurative and collective nose to the grindstone...
...The connections between debt and marginally "sexier" subjects — epidemics, food crises, and the like—are almost never made...
...Today, three-quarters of all food aid to Africa is in the form of wheat, which cannot be grown in Africa...
...Asia's annual trade growth, in contrast, was close to 8 percent...
...Thus the real causes of the protests may never become visible to the outside world...
...The decade of crisis has put a stop to whatever attempts the South once made to obtain collective advantages through the United Nations and other forums...
...As noted above, dozens of debtor countries are competing to unload primary commodities...
...Even if the higher figure were lopped off the total, it could change little or nothing with regard to the actual payments required...
...Events in Eastern Europe haven't helped...
...Under the "Toronto Terms," the most debt-distressed countries, after protracted negotiations, finally obtained agreements saving them all of one hundred million dollars annually in actual cash outflow...
...While we may welcome any measures leading to disarmament anywhere, the ability to make war and peace and to defend itself have always been essential to the nature of the state...
...Coffee and cocoa, traditionally two of Africa's most important exports, seem destined to remain on the down escalator: their prices have been in continual decline for five and seven years, respectively...
...Such a plan would have many advantages...
...This could be a valuable precedent for other European countries, which have, to date, shown a remarkable unity in their craven deferral to their American partner...
...Reimbursement of Africa's debt has led to unimaginable human suffering...
...The whole continent has become a laboratory for an experiment en grandeur nature...
...Africa's leadership must above all give their creditors credible guarantees that African peoples will be full partners in the enterprise...
...12 But such measures are part of the economic canon, and damn the consequences...
...Without exports there's no hard currency, and without hard currency there's no debt service...
...iron debt-management grip, announcing that it would apply the Trinidad terms by itself even if nobody else did...
...Latin America provides a more usurious rate of return, true, and for northern governments and multilateral institutions 7 percent may not be the most lucrative imaginable return on capital, but for the world's poorest continent, it's not bad...
...But this does not mean that the vaccinated children are healthier...
...On behalf of the creditors, the Terrible Twins of Bretton Woods—the Fund and the Bank—are forcibly applying orthodox, neoclassical, unfettered market economy doctrine to most of the southern hemisphere and to the African continent in particular...
...The choices of foreign policy...
...One positive point: UNICEF has made considerable progress in vaccinating African children and is not averse to pointing out that a greater proportion of children has been immunized against preventable diseases in parts of Africa than in the Bronx...
...This may sound odd, but is easily explained...
...2 Africa Recovery, United Nations, December 1991, p. 3. I Percy S. Mistry, African Debt Revisited: Procrastination or Progress...
...Although these creditors almost certainly did not plan on these advantages when the debt crisis first began to assume major importance, this does not mean that they are now prepared to throw them away...
...No reasonable person denies that some form of "structural adjustment" is necessary in Africa and elsewhere...
...The framework is set by the structural adjusters...
...In calculations of available aid, people sometimes forget that the former USSR and Eastern Europe used to be donors themselves— modest ones, perhaps, but donors all the same...
...Debt makes debtors timid and creditors bold...
...One need not subscribe to conspiracy theory to recognize the political advantages that debt has conferred on the creditors...
...15 It is, however, important to recall that pure and simple debt cancellation could lead to cutting Africa out of the world system altogether, and that African leaders should beware any Greeks bearing gifts of this kind...
...In 1986, 46 percent of all World Food Programs (WFP) emergency food aid operations were destined for Africa...
...In 1982, private sources invested a total of $2.2 billion in Africa...
...This change of vocabulary in the discourse of international relations reflects one of most important and least noticed phenomena of recent years...
...Debt provides a powerful lever for forcing the third-world "adversary" to submit to the will of the creditors...
...As for the presumed advantages of cheap African labor, international business seems unimpressed...
...The debt of Egypt alone amounts to about one-sixth of the African continent's entire debt burden—at least it did until Mr...
...Public investment has virtually ceased...
...Popular energies for genuine development would be mobilized, making thousands of communities and individuals more self reliant...
...This relatively small exposure was furthermore concentrated in just a handful of countries (Nigeria and COte d'Ivoire stand out...
...This is supposed to make exports more competitive, but the effects are often negligible because so many countries are devaluing at once...
...The United States is invariably singled out as the chief stonewaller: the U.S...
...Debtors dependent on the good will of creditors are also unlikely to challenge the dominant—or new, if you will—world order...
...How—if at all—might Africa escape debt bondage and begin to emerge from the depths...
...Governments have no choice but to give up much of their sovereignty to their creditors and their creditors' proxies...
...A lot of it is sold on ordinary markets at ordinary prices, with the "counterpart funds" of these sales supposedly benefiting the hungry...
...Creditors have major responsibility for the impasse, but in their own way, so have the debtors...
...Rightly or wrongly, I believe that creditors are more likely to report accurately how much they are owed and what service payments they have received than debtors are to say how much they owe and what they have paid...
...But these economies won't be genuinely affluent for several years at best, and, meanwhile, the cheap and highly skilled workers and the astonishing investment opportunities in the former communist countries are likely to make investment in Africa appear even less attractive, if not insane...
...With the single exception of tea, TNI found that the present practices and future intentions of these purchasers are highly unfavorable to Africa...
...In a not SUMMER • 1992 • 339 African Debt atypical year before the demise of the communist bloc, Tanzania received $21 million from the USSR while Zambia and Sudan had all their outstanding debt to East bloc countries rescheduled on highly favorable terms...
...In spite of a decade of sacrifices, in spite of well over one hundred billion dollars sent northward in debt service alone, by the end of 1990 Sub-Saharan Africa's debt had more than doubled...
...only the details are left to the government...
...Thirty of the forty-three SSA countries have in place formal adjustment agreements with the Fund, while most of the others have instituted policies so close to the usual IMF prescriptions as to be undistinguishable...
...It's not that all the measures the Twins impose are, in and of themselves, harmful...
...For example, X trees planted, Y schools built, could lead to Z dollars of debt forgiveness...
...Second, such funds would provide a basis for revolving credit funds granting small loans to farmers and would-be entrepreneurs...
...At present, genuine political will to cure the debt cancer is lacking on both sides and imagination is at an even lower ebb...
...The only items on the North-South agenda are privatization, competitiveness, and structural adjustment...
...African leaders should make clear to anyone who will listen that the continent simply cannot survive, much less develop, on the basis of "export-led growth...
...For example, the number of children enrolled in primary school increased dramatically in the 1970s, but declined from 1980 onward...
...The Economic Commission for Africa has published a detailed diagnosis, analysis, and economic plan, which is at once more logical and more humane than the Bank-Fund austerity scenario...
...Hospitals and schools are dilapidated, without drugs or books...
...Yet many Africans, when told this bluntly by people who are basically on their side, still protest vehemently, insisting that they are important because the rich world cannot do without their raw materials and their cheap labor...
...GATT, ibid...
...Notes 1 Unless otherwise noted, all debt figures are derived directly or calculated from OECD, Financing and External Debt of Developing Countries, 1990 Survey, OECD, Paris 1991...
...One can, perhaps, understand why the banks are prolonging the agony in Latin America: they still have some $250 billion in shaky loans outstanding there.' Banks spent the eighties disengaging from the southern hemisphere, off-loading a significant portion of their dubious debt onto public institutions, diluting their portfolios, cashing in debt against tangible foreign assets ("debt-forequity" swaps) and generally finding their way out of the Latin American woods that they entered with such enthusiasm in the 1970s...
...In 1990, the United States increased its aid to SSA (to $985 million) and so did France (to $4.4 billion), but Germany, Italy, and the United Kingdom all reduced theirs...
...Since lumping North Africa with the rest of the continent badly skews reality, we will deal from now on only with Sub-Saharan Africa (SSA), whose debt, at the end of 1990, amounted to $164 billion...
...OECD, Development Cooperation 1987 Report, Paris 1988, section on CMEA Countries, from p. 153...
...We can measure its importance in a variety of ways...
...Except for the United States, which is privileged to print and mint the world's standard unit of account, countries cannot live beyond their means forever any more than individuals or families can...
...As Karl von Clausewitz put it in his classic work On War, "War is an act of violence whose goal is to force the adversary to do our will...
...Before proceeding further, we'll specify which "Africa" we're talking about...
...Ecological destruction in Africa is widespread and growing...
...What, after all, is the objective of war...
...And when...
...The only hopeful sign for Africa so far on this front is that in 1991, the United Kingdom for the first time broke free of the U.S...
...4, February 1992, passim...
...Nineteen-ninety was a bad year, 1991 was dire...
...The indebted state is thus left with its judicial functions and, above all, the maintenance of internal public order...
...9 Only foreign Non-Governmental Organizations (NGOs) have taken pity on Africa...
...Sugar, in perpetual doldrums, fell by a further 27 percent, bauxite and groundnuts by nearly 20...
...The system is self-perpetuating...
...The debtors' collective failure to confront the creditors has given the latter an unprecedented opportunity to carry out the most enormous, ideologically driven economic experiment ever devised in history...
...The Bank and the Fund have much more influence over, say, health and education than the World Health Organization and UNESCO...
...In-kind" payments could be accepted as well...
...Though not a princely sum as these figures go, it turned out to be the best one of the decade and was followed by two years of disinvestment...
...short-term debt usually represents at least 15 percent of a country's total obligations...
...14 Outside managers do not want to be seen as involved, much less as interfering in such circumstances, and leave local police forces to put down rioters...
...This is one crucial state function the creditors want nothing to do with...
...There seem no valid economic reasons whatever for the rich world to have made Africa drag its debt burden so far, for so long...
...Creditor countries, through their aid programs, should "anchor" such funds with hard currency and should monitor the agreements so that inflation does not ensue from injection of too much local currency into the system...
...But the real questions remain: Who needs this potential...
...What they do not do well is protect the weaker and more vulnerable members of society...
...The question most people would ask, hearing yet another report of hunger in Africa, is why such countries should be required to provide a return on capital at all...
...5 Poverty, hunger, illness, illiteracy—the litany is familiar...
...Assuming the worst indeed isn't absolutely certain, what should Africa aim for...
...Between the beginning of 1982 and the end of 1991, every month, for one hundred and twenty months, SSA somehow scraped together an average of nearly a billion dollars for purposes of debt service...
...Note, however, that this incapacity to unify is not peculiar to Africa...
...The "Group of 77" leads a nominal existence...
...The existence of significant debts, or in the case of small and weak countries, even of insignificant ones, provides outsiders with huge leverage over economic and political management...
Vol. 39 • July 1992 • No. 3
